On Wednesday, the Fast Money traders were keeping a close eye on the broad market weakness after disappointing economic data triggered a sell-off in both the S&P and the Dow, despite headline making mergers, which should have generated at least some optimism.
You'd expect investors to be cheered by reports that, Applied Materials snapped up rival Varian Semiconductorfor $63 per share - a 55% premium. Or that ConAgra raised its offer for Ralcorp to $86 from $82.
However, investors largely ignored those bullish catalysts and focused on weaker than expected jobs data as well as the latest ISM number, which showed non-manufacturing growth hit its slowest pace in eight months.
The action suggests investors are growing worried that the recent rally, which pushed the S&P to a bull market high, has reached levels that may not be supported by economic fundamentals. As a result, recent winners, including the energy and materials, were among the day’s biggest losers.
Is the sell-off getting serious? How should you position now?
Instant Insights with the Fast Money traders
Trader Patty Edwards is growing very cautious. She’s focused on 1340 on the S&P. “If we go below that level we may be looking at a reverse head and shoulders pattern.” That’s a very bearish chart pattern that triggers concern among technical traders.
Edwards counsels trading conservatively until the market tests 1340; position accordingly based on whether it holds or breaks.
Trader Steve Cortes shares Edwards’ skepticism. He tells the desk he’s short almost everything on his screen expect bonds. Cortes thinks the break in silver is material. (As you may know silver is poised to make its biggest 3-day drop since 2008.)